General Motors invests $500M in Lyft

January 0503:052016

Ride hailing company Lyft said it raised $1 billion in a round of funding that values it at $5.5 billion, including a $500 million capital injection from Detroit car manufacturer General Motors. As part of the deal, GM will also have a seat on Lyft’s board, the companies said. GM’s investment in Lyft underscores the pressure traditional automaker are facing to keep up with several new trends that stand to shake up the industry in the coming decade, including the growing availability of ride-hailing apps and the race toward self-driving cars.

“We think the owner-driver model, the traditional model, will remain a very, very significant part of the transportation model. But we see ride-sharing in particular growing very rapidly,” GM president Dan Ammann said in an interview. John Zimmer, Lyft’s president and co-founder, said money will go toward new products and building “awareness” around the brand. Lyft has grown rapidly in recent years, thanks in part to its ability to spend on new products like Lyft Line, a carpooling service that reduces costs for consumers.

The San Francisco startup now operates in 190 cities, up from just 65 in early 2015. At $5.5 billion, Lyft still pales in comparison to its much larger rival, Uber, which was recently valued at more than $50 billion. That’s on par with General Motors, which is valued at $53 billion. Kingdom Holding, the investment firm of billionaire Prince Alwaleed bin Talal, was also part of the latest round of funding, contributing $100 million to Lyft. Other investors in the $1 billion round include mutual fund firm Janus Capital Management, Chinese ride-hailing company Didi Kuaidi and e-commerce company Alibaba.

GM’s investment in Lyft also is part of its plan to start making self-driving cars, a technology that’s also become a big focus for Silicon Valley tech giant’s like Google. GM predicts that when self-driving cars finally get on the road, they will be first adopted by people seeking to hail rides rather than by individual car purchasers, Amman said. “Our objective is to reshape the future of mobility,” Amman said of the company’s investment in Lyft. “We expect our business and our industry to change more in the next five years than it has in the last 50,” he said.